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Academic Commons Search Resultsen-usExports and Within-Plant Wage Distributions: Evidence from Mexicohttps://academiccommons.columbia.edu/catalog/ac:172807
Frías, Judith A.; Kaplan, David S.; Verhoogen, Eric A.http://dx.doi.org/10.7916/D84Q7S31Fri, 11 Apr 2014 12:04:01 +0000In many developing countries, increasing international integration has been accompanied by rising wage inequality, and traditional Heckscher-Ohlin models, which rely on between-sector reallocations to link trade and labor-market outcomes, are difficult to reconcile with this pattern (Goldberg and Pavcnik 2007). Recently, researchers have proposed a number of potential within-sector explanations based on the behavior of heterogeneous firms, involving technology choice, quality upgrading, search and bargaining, or fair wages, among other mechanisms. There is evidence at the plant level to support a within-sector link between trade and inequality. For instance, Verhoogen (2008) finds that initially larger, higher-productivity Mexican plants had higher export propensity and wages in cross-section in 1993 and that they were more likely to increase exports and wages in response to the late-1994 devaluation of the peso. The shock to exporting thus arguably increased dispersion in wages between plants within sectors. At the plant level, however, many of the proposed within-sector mechanisms carry similar observable implications. Distinguishing among the various mechanisms will require moving to a lower level of disaggregation, and exploiting information at the level of individual workers within plants. In this short article and the longer article to which it is a companion (Frías, Kaplan, and Verhoogen 2011), we use employer-employee data from Mexico and an identification strategy from Verhoogen (2008) to examine the effects of exporting on wage outcomes that are not available in standard plant-level datasets. In Frías, Kaplan, and Verhoogen (2011), we estimate the effect of exporting on wage premia, defined as wages above what individual workers would expect to earn elsewhere in the labor market. Wage premia are estimated as plant effects, controlling flexibly for individual heterogeneity (and allowing the return to worker ability to vary over time), implicitly assuming that the plant effect is the same for all employed workers. In this short article, by contrast, we do not attempt to control for worker heterogeneity, but instead focus on the effect of exporting on the shape of within-plant wage distributions. As we show in more detail below, we find that exporting has little effect on wages at the low end of the wage spectrum within plants, and that it raises within-plant wage dispersion, but not uniformly between all quantiles. The results are consistent with, but add important qualifications to, the finding of Verhoogen (2008) in plant-level data that exporting raised the ratio of white-collar to blue-collar average wages. This article is related to an active theory literature on trade, matching, and organizations which has proposed a variety of mechanisms linking trade and wage distributions within firms. Recent papers using employer-employee data to investigate the consequences of trade for labor-market outcomes (without focusing on the overall within-plant distributions) include Krishna, Poole, and Senses (2011); Hummels et al. (2011); and Davidson et al. (2011); see Frías, Kaplan, and Verhoogen (2011) for a fuller literature review.Economics, Labor, Economic theoryev2124International and Public Affairs, EconomicsArticlesClass size and sorting in market equilibrium: Theory and evidencehttps://academiccommons.columbia.edu/catalog/ac:114798
Urquiola, Miguel S.; Verhoogen, Eric A.http://hdl.handle.net/10022/AC:P:444Mon, 28 Mar 2011 10:19:38 +0000This paper examines how schools choose class size and how households sort in response to those choices. Focusing on the highly liberalized Chilean education market, we develop a model in which schools are heterogeneous in an underlying productivity parameter, class size is a component of school quality, households are heterogeneous in income and hence willingness to pay for school quality, and schools are subject to a class-size cap. The model offers an explanation for two distinct empirical patterns observed among private schools that accept government vouchers: (i) There is an inverted-U relationship between class size and household income in equilibrium, which will tend to bias cross-sectional estimates of the effect of class size on student performance. (ii) Some schools at the class size cap adjust prices (or enrollments) to avoid adding another classroom, which produces stacking at enrollments that are multiples of the class size cap. This generates discontinuities in the relationship between enrollment and household characteristics at those points, violating the assumptions underlying regression-discontinuity (RD) research designs. This result suggests that caution is warranted in applying the RD approach in settings in which parents have substantial school choice and schools are free to set prices and influence their enrollments.Economic theory, Educationmsu2101, ev2124International and Public Affairs, EconomicsWorking papersWhy might one expect environmental Kuznets curves? Examining the desirability and feasibility of substitutionhttps://academiccommons.columbia.edu/catalog/ac:113152
Talikoff, Alexander Strickland Pfaff; Chaudhuri, Shubham; Nye, Howard L. M.http://hdl.handle.net/10022/AC:P:374Wed, 23 Mar 2011 09:32:10 +0000This paper provides simple, transparent intuition for the perhaps surprising and certainly widely debated empirical findings of "environmental Kuznets curves", i.e. U-shaped relationships between per-capita income and indicators of environmental quality. We consider one possible component of such relationships: the linkage between income and household choices that impact upon the environment. Our explicit model emphasizes two features. First, degradation of the environmental endowment is a by-product of household activities. We present a household production model in which consumption of marketed commodities generates both a "good", desired non-environmental services, and a "bad", degradation of the environment. Second, while households can not directly purchase environmental quality, they can reorganize their activities so less degradation results. If environmental quality is a normal good, one expects substitution towards less degrading commodities, so that increases in income will increase environmental quality. We show that natural constraints on the desirability and feasibility of such substitution can produce non-monotonic relationships between household income and environmental quality, and in particular can produce household-level environmental Kuznets curves.Economic theoryap196, sc301Earth Institute, Economics, International and Public AffairsWorking papersMobility costs and the dynamics of labor market adjustment to external shocks: Theoryhttps://academiccommons.columbia.edu/catalog/ac:112919
Chaudhuri, Shubham; Cameron, Stephen; McLaren, Johnhttp://hdl.handle.net/10022/AC:P:364Tue, 22 Mar 2011 12:22:12 +0000We construct a dynamic, stochastic rational expectations model of labor reallocation that is designed so that its key parameters can be estimated for trade policy analysis. A key feature is the presence of time-varying idiosyncratic moving costs faced by workers. As a consequence of these shocks: (i) gross flows exceed net flows (an important feature of empirical labor movements); (ii) the economy features gradual and anticipatory adjustment to aggregate shocks; (iii) wage differentials across locations or industries can persist in the steady state; and (iv) the normative implications of policy can be very different from a model without idiosyncratic shocks, even when the aggregate behavior of both models is similar. It is shown that the solution to a particular planner's problem yields a competitive equilibrium, thus facilitating the analysis and simulation of the model for policy purposes.Economic theorysc301, sc337, jem18Economics, International and Public AffairsWorking papersProgram evaluation as a decision problemhttps://academiccommons.columbia.edu/catalog/ac:113687
Dehejia, Rajeev H.http://hdl.handle.net/10022/AC:P:397Tue, 22 Mar 2011 11:12:47 +0000I argue for thinking of program evaluation as a decision problem. There are two steps. First, a counselor determines which program (treatment or control) each individual joins, based for example on maximizing the probability of employment or expected earnings. Second, the policymaker decides whether: to assign all individuals to treatment or to control, or to allow the counselor to choose. This framework has two advantages. Individualized assignment rules (known as profiling) can raise the average impact, improving cost effectiveness by exploiting treatment-impact heterogeneity. Second, it accounts systematically for inequality and uncertainty, and the policymaker's attitude toward these, in the evaluation.Economic theoryrd247Economics, International and Public AffairsWorking papersThe Classical Roots of Neo-classical Political Economyhttps://academiccommons.columbia.edu/catalog/ac:113408
Wellisz, Stanislaw H.http://hdl.handle.net/10022/AC:P:385Tue, 22 Mar 2011 10:25:20 +0000Neoclassical Political Economy applies the concepts and techniques of Neoclassical Analysis to elucidate the interrelations between the Economy, the Polity and the State. The basic issues at hand were clearly stated by the social thinkers of the 17th, 18th and 19th Centuries, often referred to (admiringly or disparagingly) as the "Classics". The "Classics" lacked the analytic techniques of contemporary social science. They had no access to statistical data and had no knowledge of quantitative methods. They lived in a universe much simpler than ours. They often failed to distinguish between the normative and the positive approach. Yet despite such limitations (or perhaps because of them) they often had an extraordinary clarity of vision. The insights of Hobbes, Locke, Hume, Adam Smith, of Madison and of Marx, are signal posts for to-day's Political Economists.Economic theorysw11Economics, International and Public AffairsWorking papersPropensity score matching methods for non-experimental causal studieshttps://academiccommons.columbia.edu/catalog/ac:113970
Dehejia, Rajeev H.; Wahba, Sadekhttp://hdl.handle.net/10022/AC:P:409Tue, 22 Mar 2011 09:17:20 +0000This paper considers causal inference and sample selection bias in non-experimental settings in which: (i) few units in the non-experimental comparison group are comparable to the treatment units; and (ii) selecting a subset of comparison units similar to the treatment units is difficult because units must be compared across a high-dimensional set of pretreatment characteristics. We discuss the use of propensity score matching methods, and implement them using data from the NSW experiment. Following Lalonde (1986), we pair the experimental treated units with non-experimental comparison units from the CPS and PSID, and compare the estimates of the treatment effect obtained using our methods to the benchmark results from the experiment. For both comparison groups, we show that the methods succeed in focusing attention on the small subset of the comparison units comparable to the treated units and, hence, in alleviating the bias due to systematic differences between the treated and comparison units.Economic theoryrd247Economics, International and Public AffairsWorking papersWas there a Riverside miracle? An hierarchical framework for evaluating programs with grouped datahttps://academiccommons.columbia.edu/catalog/ac:113947
Dehejia, Rajeev H.http://hdl.handle.net/10022/AC:P:408Tue, 22 Mar 2011 09:07:01 +0000This paper uses data from the Greater Avenues for Independence (GAIN) demonstration to discuss the evaluation of programs that are implemented at multiple sites. Two frequently used methods are pooling the data or using fixed effects (an extreme version of which estimates separate models for each site). The former approach, however, ignores site effects. Though the latter incorporates site effects, it lacks a framework for predicting the impact of subsequent implementations of the program (e.g., will a new implementation resemble Riverside or Alameda?). I present an hierarchical model that lies between these two extremes. For the GAIN data, I demonstrate that the model captures much of the site-to-site variation of treatment effects, but has less uncertainty than a model which estimates treatment effects separately for each site. I also show that uncertainty in predicting site effects is important: when the predictive uncertainty is ignored, the treatment impact for the Riverside sites is significant, but when we consider predictive uncertainty, the impact for the Riverside sites is insignificant. Finally, I demonstrate that the model is able to extrapolate site effects with reasonable accuracy, when the site for which the prediction is being made does not differ substantially from the sites already observed. For example, the San Diego treatment effects could have been predicted based on observable site characteristics, but the Riverside effects are consistently underestimated.Economic theoryrd247Economics, International and Public AffairsWorking papersPropensity Score Matching Methods for Non-Experimental Casual Studieshttps://academiccommons.columbia.edu/catalog/ac:100494
Dehejia, Rajeev H.; Wahba, Sadekhttp://hdl.handle.net/10022/AC:P:15733Mon, 07 Mar 2011 09:54:35 +0000This paper considers casual inference and sample selection bias in non-experimental settings in which: (i) few unites in the non-experimental comparison group are comparable to treatment units; and (ii) selecting a subset of comparison units similar to the treatment units is difficult because units must be compared across a high-dimensional set of pre-treatment characteristics. We propose the use of propensity score matching methods, and implement them using data from the NSW experiment. Following Lalonde (1986), we pair the experimental treated units with non-experimental comparison units from the CPS and PSID, and compare the estimates of the treatment effect obtained using out methods to the benchmark results from the experiment. We show that the methods succeed in focusing attention on the small subset of the comparison units comparable to the treated units and, hence, in alleviating the bias due to systematic differences between the treated and comparison units.Economic theoryrd247Economics, International and Public AffairsWorking papersWages, Flexible Exchange Rates, and Macroeconomic Policyhttps://academiccommons.columbia.edu/catalog/ac:124462
Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8372Tue, 26 Jan 2010 09:43:18 +0000In an open economy with a floating exchange rate, the efficacy of fiscal and monetary policy depends fundamentally on the wage-setting process. In the canonical models of Mundell and Fleming, monetary expansion raises output via an exchange rate depreciation, while fiscal expansion has no output effect. These results hold only when real wages can be altered by exchange rate movements; if the real wage is fixed, the Mundell-Fleming ranking of policy is reversed. This paper explores the interaction of wages and policy in short- and long-run models, under the assumptions of perfect foresight and world capital mobility.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementArticlesDynamic Optimization in Two-Party Modelshttps://academiccommons.columbia.edu/catalog/ac:123924
McKibbin, Warwick J.; Roubini, Nouriel; Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8241Tue, 29 Sep 2009 14:31:09 +0000The goal of this paper is to study the problem of optimal dynamic policy formulation with competing political parties. We study a general class of problems, in which the two competing political parties have quadratic intertemporal objective functions, and in which the economy has a linear structure and a multidimensional state space. For the general linear quadratic problem we develop a numerical dynamic programming algorithm to solve for optimal policies of each party taking into account the party's objectives; the structure of the economy; the probability of future election results; and the objectives of the other political party.Political science, Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersThe Current Account in the Macroeconomic Adjustment Processhttps://academiccommons.columbia.edu/catalog/ac:123861
Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8223Mon, 28 Sep 2009 16:25:09 +0000This paper provides a formal analysis of the current account balance in a dynamic model with optimizing agents. Two analytical ideas are stressed. First, an economy's current account balance depends as much on fixture economic trends as on the current economic environment. A shift in fiscal policy, for example, will have one effect on the current account if it is perceived to be temporary and another if it is seen to be permanent. Second, temporary disturbances in the economy have permanent effects, by altering the entire future path of the economy's international indebtedness.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersThe International Economics of Transitional Growth -- The Case of the United Stateshttps://academiccommons.columbia.edu/catalog/ac:123858
Kotlikoff, Laurence J.; Leamer, Edward E.; Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8222Mon, 28 Sep 2009 16:20:59 +0000This paper develops a general equilibrium two country, two commodity dynamic simulation model of international trade in commodities and financial claims. The model generalizes the Heckscher-Ohlin static theory of trade by incorporating costs of quickly adjusting levels of capital stocks in particular industries; i.e., capital mobility in the short run is permitted, but at a price. The model predicts Heckscher-Ohlin relationships, including factor price equalization, in the long run, but not during the economy's transition path to its ultimate steady-state. An interesting feature of the model is that it provides a determinate solution to the long-run international allocation of the world's capital stock. This is true despite the fact that the Rybchinski theorem holds in the long run. The simulation model of international trade with costly capital stock adjustment appears capable of explaining many features of the patterns of factor price equalization, international investment, and changes in comparative advantage that have characterized the post-war period.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersEnergy and Growth Under Flexible Exchange Rates: A Simulation Studyhttps://academiccommons.columbia.edu/catalog/ac:123855
Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8221Mon, 28 Sep 2009 16:16:44 +0000This paper offers a theoretical framework for studying the interactions of energy prices and economic growth. The incorporation of energy prices and quantities in a macroeconomic setting focuses on (1) the aggregate technology; (2) the interdependence of energy producers and consumers in the world economy; and (3) the asset markets as the channel through which energy price changes affect output and capital accumulation. While several existing studies consider aspects of these issues, none provides a synthesis. In this analysis, a theoretically sound model of an oil price increase in the world economy is presented, carefully treating topics (1) - (3). The model is solved with computer simulation, as it is far too complex to yield analytical solutions.Economic theory, Energyjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersMultiple Shooting in Rational Expectations Modelshttps://academiccommons.columbia.edu/catalog/ac:123833
Lipton, David; Poterba, James; Sachs, Jeffrey D.; Summers, Lawrencehttp://hdl.handle.net/10022/AC:P:8215Mon, 28 Sep 2009 15:33:10 +0000This note describes an algorithm for the solution of rational expectations models with saddlepoint stability properties. The algorithm is based on the method of multiple shooting, which is widely used to solve mathematically similar problems in the physical sciences. Potential applications to economics include models of capital accumulation and valuation, money arid growth, exchange rate determination, and macroeconomic activity. In general, whenever an asset price incorporates information about the future path of key variables, solution algorithms of the type we consider are applicable.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersIs the Environmental Kuznets Curve Driven by Structural Change? What Extended Time Series May Imply for Developing Countrieshttps://academiccommons.columbia.edu/catalog/ac:123794
Panayotou, Theodore; Peterson, Alix; Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8207Mon, 28 Sep 2009 13:46:28 +0000Until recently, it was thought that the relationship between economic growth and environmental degradation was a monotonic one, even though there was little agreement as to whether economic growth led to environmental degradation or to increasing environmental quality. At the one extreme there are those who argue that economic growth results in ever increasing use of energy and materials and expanding worker productivity and hence more environmental degeneration. At the other extreme are those who claim that the fastest road to environmental improvement is along the path of economic growth; with higher income comes increased demand for improved environmental protection measures. From this perspective, as Beckerman (1992) put it: "the surest way to improve your environment is to get rich" (quoted by Rothman 1998, pp. 178). A number of empirical studies in the early 1990s (Grossman and Krueger 1991, 1994; Shafik and Bandyopadhyay 1992; and Panayotou 1992, 1993, and 1995) found a nonmonotonic, inverted U-relationship between a number of local pollutants such as particulates and sulfur dioxide and income suggesting a changing relationship between environment and growth along the course of economic development (see Figure 1). At an early stage of development the environment deteriorates with economic growth until a certain level of per capita income is reached beyond which further increases in income result in environmental improvements. The changing income-environment relationship in the course of economic development, known as the Environmental Kuznets Curve (EKC) was attributed largely to behavioral factors: as income rises the effective demand for environmental quality (an income-elastic amenity) rises and eventually overwhelms any scale effects of economic growth on pollution. The behavioral explanation of the EKC presumes a perceived impact of pollution on health, quality of life, or welfare more generally; it is the changing valuation of these impacts as income increases that brings about the reversal of the growth-environment relationship. It is, therefore, surprising that empirical studies in the late 1990s (e.g. Schmalensee, Stoker, and Judson 1998 and Panayotou, Sachs, and Peterson 1999) found the same inverted U-relationship between a global pollutant, CO2, and economic growth. CO2 is greenhouse gas, which is not visible or in anyway perceptible, and any impact (global warming) it may have is distant, dispersed, and highly uncertain. It is, therefore, unlikely that behavioral changes (due to perceptible climate change) can explain falling CO2 emissions per capita once a certain level of per capita income is reached. A different explanation is called for.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersPattern of Trade and Economic Development in the Model of Monopolistic Competitionhttps://academiccommons.columbia.edu/catalog/ac:123659
Sachs, Jeffrey D.; Yang, Xiaokai; Zhang, Dingshenghttp://hdl.handle.net/10022/AC:P:8168Fri, 25 Sep 2009 12:41:50 +0000The paper introduces differences in production and transaction conditions between countries into the model of monopolistic competition to investigate the interplay between trade policies and development strategies. It applies inframarginal analysis, which is total benefit analysis between corner solutions in addition to marginal analysis of each corner solution, to show that as transaction conditions are improved, the general equilibrium may discontinuously jump across different patterns of trade and economic development. It compares the marginal and inframarginal comparative statics of equilibrium in the model of monopolistic competition with the core theorems in the neoclassical trade models and with conventional wisdom in development economics. It shows that as analytical framework is altered, the meanings of concepts and related empirical observations will be changed too.Economics, Commerce-Business, Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersAn Inframarginal Analysis of the Heckscher-Olin Model with Transaction Costs and Technological Comparative Advantagehttps://academiccommons.columbia.edu/catalog/ac:124062
Cheng, Wen Li; Sachs, Jeffrey D.; Yang, Xiaokaihttp://hdl.handle.net/10022/AC:P:8052Fri, 25 Sep 2009 12:28:46 +0000In the paper we introduce technological comparative advantage and transaction costs into the Heckscher-Olin (HO) model and refine the HO theorem, the Stolper-Samuelson theorem, the Rybczynski theorem, and factor equalization theorem. The refined core theorems can be used to accommodate recent empirical evidence that is at odds with the core theorems.Economics, Commerce-Business, Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementWorking papersInternational Linkages of the Korean Economy: Simulations with the Korean Global Modelhttps://academiccommons.columbia.edu/catalog/ac:124450
Boone, Peter; Lee, Jong-Wha; Sachs, Jeffrey D.http://hdl.handle.net/10022/AC:P:8368Mon, 14 Sep 2009 16:48:39 +0000This paper introduces a dynamic general equilibrium model of the Korean economy. The Korean economy has nine producing sectors and is linked to other blocks in the world, which consist of the U.S., Japan, the rest of the OECD, OPEC, and other economies. Some simulation results are presented to show the functioning of the Korean economy and its linkages to the world economy given internal and external policy changes.Economic theoryjs2201Earth Institute, Economics, International and Public Affairs, Health Policy and ManagementArticles